Managers in service industries are beset with the problem of low productivity. They are under the compulsion to raise the productivity of knowledge and service workers. The following reasons are attributed for the low level of productivity prevailing in the service sector.
Reason for low productivity in services industries
1. Service industries need team development
Services are marked by certain unique characteristics resulting in certain unique problems. Service provision is a task for team and not for individual. A network of employees is involved in providing service and generating customer satisfaction. There will be employees who come into close and lengthy contact with the customer. There will be those who come into contact with the customers for a very short duration. There will be employees who take care of the backroom activities. All these employees should combine and generate customer satisfaction. Team development, therefore, becomes specially important in services marketing. Services marketers have to develop teams and ensure that personnel work as teams. Failure to develop a team work will adversely affect the productivity in the service sector.
2. Service industries are labor-intensive
Services are highly people-intensive unlike physical products which are material-intensive. While in the case of physical products, a bad product can-be taken back or replaced. But a bad service rendered cannot be taken back or replaced. So, it has to be performed right the first time and every time. This obviously means people matter a great deal in service business. To increase output in service firms larger and larger amounts of labor are heeded.
Tangible goods production is most often capital-intensive. This means that increasing output needs more capital in the form of more and better machine technology. It is comparatively easier to lower per unit cost of output in capital intensive industries rather than in labor-intensive industries. There has been a hike in the wages payable to the personnel engaged in the provision of services. Service industries cannot meet the increasing cost of labor by rising output per worker.
3. Measuring and monitoring service quality are difficult
The importance of quality assurance in service marketing can never be over emphasized. A service must be performed right the first time and every time. The damage done on any occasion leaves a permanent mark and the effect of a badly rendered service cannot be excused. While quality assurance is of utmost importance in services, it is highly difficult to assure quality to the customers. Even measuring quality is difficult in services.
Quality aspects in respect of service are more difficult to define. Quality of a service includes many subjective elements. Service quality is ensured only by enhancing productivity. In the case of physical products, one can exercise a rigorous control over the quality of all ingredients. But in services there is no scope for maintaining productivity through a quality control department.
4. Most service establishments are of small size
Service firms, in general, are small in size. It is obvious that speed is a vital element in a service offer. Both response time and actual time are important. One can always improve a service by improving response time and actual service time. The firm should ensure that infrastructure and man power for meeting the standard are adequate.
To be effective, employees in service business need good communication skill. So, they should be given suitable training. Apart from this, the employees in the service firm should be given behavioral training. It depends on whether the employee is in a high contact situation or a low contact situation with customers.
In a restaurant for example, the waiter is in a high contact situation while the cook is in a low contact situation and is practically invisible. Services marketers should devote particular attention to the behavioral aspects of training. Being small in size, most of the service firms find it difficult to meet the cost of training employees in various areas of skills.
5. Using machine technology and other labor saving devices is difficult
Most service firms employ relatively a small number of people. Service workers are generalists, not specialists. So, there is a little scope in the small firms to develop specialization. Labor costs often constitute the largest portion of the service product’s total price. In services it is extremely difficult to increase output with machines. Only people are needed in a large number to generate an increased output. Further quality also depends upon people. In other words, only service personnel by using technology can satisfy customers with right quality of service. Mere use of technology cannot assure customers quality.